Starting in July, Freddie Mac will make it easier for distressed borrowers who are having trouble meeting their monthly mortgage payments obtain a loan modification.
Called the Streamlined Modification initiative, servicers will proactively offer eligible borrowers refinancing’s similar to a Standard Modification but with less paperwork. Freddie Mac said the Streamlined Modification program will target borrowers who are at least 90 days delinquent on mortgages that are 12 months old.
As part of the program, eligible borrowers are not required to submit documentation, but can accept a Streamlined Modification offer simply by making the trial period payments. The modification becomes permanent once the borrower shows that they have the ability to pay by completing the trial periods.
The McLean, Va.-based government-sponsored enterprise said the Streamlined Modification offers the same mortgage terms as the Standard Modification announced in September 2011, which enables servicers to reduce a borrower’s monthly mortgage payment by adjusting interest rates, extending payment terms to 40 years, and providing principal forbearance for certain underwater borrowers.
“The Streamlined Modification will open a new gateway to mortgage relief for many of America’s struggling borrowers,” said Tracy Mooney, senior vice president of servicing and REO at Freddie Mac in a press release. “We look forward to working with our servicers to implement the Streamlined Modification initiative, which underscores our commitment to keep more financially troubled borrowers in their homes.”
Since the housing crisis began, Freddie Mac has helped approximately 2.6 million families avoid foreclosure through mortgage modifications or refinancing, Mooney noted.